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Monday March 4th, 2024

Sri Lanka govt expediting development projects targeting election: PAFFREL

ECONOMYNEXT — Sri Lanka will definitely call a presidential election by July 2024, election observer PAFFREL said, accusing the government of expediting development programmes targeting the coming presidential poll.

Chairman of the People’s Action for Free & Fair Elections (PAFFREL) Rohana Hettiarachchi told reporters on Friday February 08 that a circular issued by the presidential secretariat in January has directed officials to complete all 2024 development projects initiated under a 10-year plan to develop the hill country by July this year.

“The government is prioritising elections that it has a higher probability of winning over other elections that the people are currently owed,” said Hettiarachchi, referring to the long delayed local government elections.

He urged Prime Minister Dinesh Gunawardena who hold the local government portfolio to see to it that those elections aren’t further postponed.

“If people’s democratic space is removed, they might resort to other means to win these rights,” Hettiarachchi warned.

The election monitor said that Sri Lanka’s upcoming presidential election period must begin by July.

“The election commission must decide it. In order to hold the election before October 17, the election must be called in the first days of July,” he said.

“There are four, five months for that. The president has the power to dissolve parliament. The incumbent president can do it, but based on the current situation, it is clear that the presidential election will definitely be held this year,” he added.

Hettiarachchi said the government engaging in development activities targeting the election.

“The presidential secretariat issued a circular on January 24 which discusses the government’s 10 year plan for development in the central hills. But in this 10 year plan, it says clearly that all development projects [for 2024] must be completed before July 31, 2024. It says the funds allocated for a year must be spent in six months. Why is that?

“It is clear that the ulterior motive in this is that the presidential election, which would definitely have to be called by July, and having completed these projects by then will put the government at an advantage,” he said. (Colombo/Feb08/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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Sri Lanka loses MICE tourists to Thailand on minimum room rates

ECONOMYNEXT – Sri Lanka has lost Meetings, Incentive Travel and Exhibition travelers to competitors in East Asia and India due to minimum room rates as higher standard rooms were available in other countries at lower prices, industry officials said.

President of the Sri Lanka Association of Inbound Tourist (SLAITO) Nishad Wijetunga said they the industry managed to retain a majority of booking made before the minimum room rates were imposed by the state last year.

“However, there were MICE groups that were supposed to come and cancelled Sri Lanka and went to places like Thailand and other parts of India and we lost,” Wijetunga told EconomyNext.

“We know that large groups of MICE (tourists) are affected.”

India is a key source of MICE tourists to Sri Lanka.

Sri Lanka’s businesses have got used to protectionism and try to push up prices with import taxes to extract more money from customers using the coercive power of the state, with tiles and steel being among the most prominent examples.

RELATED: Stand-alone hotels unviable in Sri Lanka due to high construction, capital costs

High priced tiles and steel in turn makes hotels expensive to build and make the leisure industry less competitive, analysts say.

However, in tourism, unlike in building materials customers are not trapped within the country and are free to move to other markets.

Managing Director of CEC Events and Travels, Imran Hassan, said the industry lost groups to East Asia due to minimum room rate.

In one instance, an operator was in discussions to get a group of 900 passengers.

“And that moved out to Thailand,” Hassan said. “Like that, there are many instances that the minimum room rate was not conducive.”

Thailand in 2023 attracted 28.04 million tourists.

A group that used to come to Sri Lanka annually used to take 40 to 50 five-star hotel rooms. This time Sri Lanka competed by offering lower standard.

“This year, they’re only giving 10 rooms to the five-star hotels,” Hassan explained. “They are staying in smaller hotels because they can’t afford it because it has become so expensive.”

“But overall, we are working with the authorities to correct it.

“We don’t mind demand and supply situation taking the rates up as in the Maldives. But what we are saying is keep an open market.”

RELATED : Sri Lanka should say good bye to minimum room rates: President

President Ranil Wickremesinghe has said Sri Lanka cannot progress with protectionism and the country has to learn to face competition. (Colombo/Mar04/2024)

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Sri Lanka coconut auction price up 4.7-pct

ECONOMYNEXT – Sri Lanka’s average coconut auction price rose 4.7 percent to was 73,962 per 1,000 nuts on February 29, data from the Coconut Development Authority shows.

The highest price was 79,600 rupees for 1,000 nuts up from 77,100 rupees a week ago, while the lowest was 67,000 up from 61,000 rupees.

A total of 411,631 coconuts were offered at the auction and 325,591 nuts were sold.

Wholesale prices were 95 to 105 rupees for small nuts and 110 to 120 rupees per large nut in the week to February 15, 2024.

Farmgate prices in Kurunegala were 70,000 to 75,000 rupees per 1,000 nuts up from 70,000 -72,000 per 1000 nuts a week ago.

Coconut oil was 570,000 to 590,000 rupees per metric ton from last week’s 580,000- 600,000.

Coconut shells were 28,000 to 29,000 rupees a metric ton up from last week’s 26,000-28,000. (Colombo/Mar01/2024)

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